Heat now on private sector in climate battle
14 December 2015
The Paris 2015 Climate Summit marked a crucial milestone in the battle against climate change. It was a now-or-never opportunity for 196 nations to finally pull together and sign a deal to keep global warming well below 2°C. The high expectations were met.
The pact clinched on the final day of the conference is the first to commit all countries to cut carbon emissions. But the heat is still on. Now it’s up to the private financial sector to channel more capital to climate-friendly projects that support the Paris accord. ING is ready to take its part.
Reversing the effects of climate change will require significant financial resources. Which is why the financial aspects of transitioning to a low-carbon economy were such a prominent part of the conference agenda.
“What distinguished this climate summit from previous ones was the increased role of the private sector,” said Léon Wijnands, ING global head of Sustainability. “The challenges arising from climate change have become so big that the public and private sector realise they have to join forces to solve them.”
Mobilising the necessary capital
With the summit now over, Wijnands believes banks will play an even bigger role in mobilising the necessary money to curb global warming.
“The United Nations Environment Programme Finance Initiative (UNEP FI) has estimated that, in the most extreme scenario, up to USD 16 trillion will be needed to finance the transition to a low-carbon economy. If we need 16 trillion dollars, you can’t just rely on the public sector. Banks are increasing their financing of green initiatives, and the green bond market is booming. My main message to negotiators was that the money is there and that banks can quickly find the capital. By making choices in what we will and won’t finance, banks can play a decisive role in the transition to a low carbon economy. For instance, ING has decided to end financing of new coal fired power stations and coal mines.”
The role of private finance
Karien van Gennip, member of UNEP FI and CEO of ING Bank France, represented the global banking community in a panel discussion aimed at giving negotiators more insight into what the private financial sector is doing to tackle climate change.
She told them that a new financing paradigm is emerging called positive impact financing.
“As a financial sector, our footprint might be relatively small, but our impact can be huge. In particular, when we decide whom to lend to and under what criteria; when we bring investors’ capital together with sustainable projects; when we urge our business partners to take climate change into consideration."
“For us as bankers, climate change means thinking beyond the traditional balance sheet approach and redirecting capital so that it has a positive impact on society.”
Van Gennip cited the Positive Impact Manifesto (PDF 0.4 MB) , launched in October 2015 by the UNEP FI (which includes 200 banks from around the globe), as the most recent example of this shift. The Manifesto, of which ING was one of the initiators, challenges banks to think more holistically about their role in the economy and direct more finance to projects with greener credentials. Eleven banks have already signed up. In Paris, Van Gennip urged more to join.
Pursuing green innovation
Many of ING’s corporate clients were also at the summit. “A large number of companies are stepping in to tackle climate change, either by becoming carbon neutral, investing in low-carbon technologies or developing new business models. — for example business models based on the circular economy,” said Wijnands. “I think all those examples gave negotiators the feeling that there’s a lot of fertile ground where people, both individually and collectively, can take extra steps.
“ING already supports its clients in their sustainable transition through advice and through lending for a broad range of sustainable projects including renewable energy, water and low-carbon transportation projects. ING also helps by discussing how to co-create new forms of financing that a low-carbon economy will need in the future."
“We recently issued a green bond supporting six sustainable sectors. At least 20% of the proceeds will go to financing new sustainable projects."
“It was good that ING was visible in Paris to demonstrate to clients that we take our responsibility seriously,” continued Wijnands. “But it was also important to hear what’s on their minds, what developments are happening in their companies, and where the market is going. With that information we can serve our clients better, and also cooperate better to develop new types of financing, new markets and new business models.” “I’ve come back from Paris with an even stronger conviction about the many innovative opportunities in sustainability.”